Record high levels of optimism amongst Irish small and medium sized businesses (SMEs) have dropped back to more average levels as the turmoil of US tariff announcements drives more uncertainty, according to a new business confidence survey by Linked Finance.

Business optimism amongst all SMEs was 67% at the end of Q4 2024, but this has fallen back to a more average 62%, for Q1 2025.

While there has been no “cliff edge” fall in business activities, they remain in slightly negative territory year-on-year.  

SMEs surveyed for the sentiment tracker reported a drop in business of -5% at end of Q1 2025, compared to a dip of -3% for the same period in 2024.

There was a significant upward spike in activities by exporters last quarter, likely due to a surge in orders to fill warehouses ahead of signalled changes to trade and new tariffs - announced by US President Donald Trump on April 2 last.

The survey shows that 36% of exporting SMEs saw higher business activity in the first quarter of this year, compared to 25% of SMEs focused on the indigenous sector.

Concerns around a potential trade war are higher among the larger Irish SMEs surveyed, business based outside Dublin, and those in the retail/wholesale sector.

One-in-four are very concerned about the issue, post the initial announcement of trade tariffs in the US.  

In terms of SMEs’ expectations for business activity in Q2 2025, there has been a major swing in that of exporters, with 34% more reporting an expected drop in business, year-on-year.

This may however be related to the fact that so much export activity was frontloaded in Q1 of this year. 

More positively, micro-businesses (which have 1-3 employees) have posted their lowest level of concern since Covid shuttered doors in 2020, with almost seven in 10 confident of the same, or a higher level, of business activity this quarter. 

While employment levels remain strong, businesses based in Dublin are driving jobs growth, while those based outside the capital are in neutral territory. 

Linked Finance CEO Niall O’Grady said that geopolitical turbulence has caused a rapid return to long term average levels of business confidence, with an uncertain outlook in the medium term.

“While there has been a dip in optimism, and that gap between businesses in the capital and outside the capital continues to exist, Irish SMEs have shown resilience in the past - given the many challenges to trade in recent years - including Brexit and Covid,” O’Grady said.

“Micro-businesses only saw a small decline in optimism, and price rises are pulling back, which is good for customers.”

“Given the turbulence and uncertainty experienced since the start of the year, I am not surprised by some of these results; but overall, Irish SMEs are weathering the challenges well.

“They are understandably concerned about the macro environment, but they are sourcing new markets, which is something many SMEs have been adept at - and may focus on more in the long term.” 

The quarterly Business Confidence survey is conducted by Ipsos B&A on behalf of Linked Finance, which is Ireland’s leading SME peer-to-peer lender.

In operation since 2013, Linked Finance recently passed the lending milestone of €350m, and has just raised €50m in wholesale funding that is now available to its SME borrowers.